Megatrends

The most influential Megatrends set to shape the world through 2030, identified by Euromonitor International, help businesses better anticipate market developments and lead change for their industries.

Population growth in Turkey driving increase in households

In the last decade there has been a big increase in the number of Turkish households and couples with children still make up the overwhelming majority of households, in contrast to its more mature European neighbours. Their pooled incomes are attractive to consumer-related sectors while the rise in household numbers will also benefit the construction industry.

Issue

Since 1996, there has been a dramatic increase in the number of households in Turkey with the total standing at 15.7 million in 2006, a rise of 22% in that period. The rise in household numbers can be attributed to a rise in the population (an increase of 8% between 2001 and 2006) and higher demand for housing.

Number of households in Turkey: 1996-2006

Source: Euromonitor International from National Statistics.

There has also been an explosion in the number of urban households between 1996 and 2006 with the number increasing to 10.6 million, an increase of 33% in the period. Conversely, rural households have only increased by 3% in the same time frame to 5.1 million. The increase in urban households is due to migration from the countryside as traditional labour-intensive farming methods are replaced by machines;

The number of homeowners is also high in Turkey at 11.6 million households in 2006, or 74% of all households. Historically the Turks have turned to real estate investments, owing to high inflation and an uncertain economy.

Importance

The household figures illustrate important developments in the structure of Turkish economy and society:

The dramatic rise in the number of households corresponds with a marked increase in construction activity due to heightened demand. The total number of new buildings increased from 77,430 in 2001 to 106,664 in 2005, an increase of 38%;

Couples with children made up 66% of total households. Single person households account for less than 2% of the total, illustrative of strong family values where children live with their parents until marriage. The dominance of couples with children are an important target for consumer-orientated industries, given their pooled incomes;

The increasing dominance of urban households versus rural ones shows a clear trend in the acceleration of urbanisation in Turkey and a move away from an agrarian society;

This rapid increase in urban housing is also illustrative of the movement of labour into service-orientated sectors. In January 2007, 49% of the labour force was employed in services compared with only 26% in agriculture.

Percentage share of employed population by sector in Turkey: January 2007

Source: National statistics.

Implications

The composition and development of Turkish households has certain implications for the shape of consumerism and business:

Considerable construction activity has implications for the enlargement of the labour force. Turkey’s urban labour force participation rate has increased from 44.0% in 2001 to 45.2% in January 2007;

The increase in population and the large proportion of multiple-occupancy households will mean a larger pooled income and offers potential for retail businesses;

The dominance of family-orientated households is also in contrast to other Western European economies. Single person households have a higher propensity for spending on luxury and convenience goods. Given the large numbers of family households, retailers should be supplying the demand for family orientated goods as well;

The ratio of annual disposable income per household to per capita for Turkey in 2006 was high at 4.7, compared with Portugal at 2.7 and Greece at 2.9. This demonstrates the gap between Turkey’s income and those of the poorer states of Western Europe but also illustrates the larger number of people per household in Turkey;

The increase in urbanisation will also have implications for the growth of city boundaries as large cities like Istanbul and Ankara become more sprawling. Whilst Istanbul did not even rank amongst urban agglomerations with more than 5 million people in 1975, by 2000 its population ranked 22nd in the world with a total of nearly 9 million. By 2015 this figure is expected to reach just over 11 million, and a ranking of 19.

Future Scenarios

Real GDP growth is projected at 5% and 6% in 2007 and 2008 respectively. This relatively healthy growth should positively affect disposable income growth if inflation can be controlled more effectively.

The new mortgage law, which was enforced in April 2007, will provide a boost for the real estate sector in Turkey. New longer-life mortgages will be available to potential house buyers making borrowing more affordable. Turkey could also see an influx of foreign homeowners, as the law makes it easier for foreigners to secure a mortgage. However, this could price local buyers out of the market as both of these elements could lead to a rise in demand in housing and house prices.

Turkey’s retail market is estimated to be worth US$124.4 billion and by 2010 supermarkets and hypermarkets are expected to take a 60% share, fuelled by urbanisation and the rapid growth in households. Therefore, opportunities exist for retailers to maximise the returns.

Given the current battle between traditional religious factions and modern secular forces, businesses in Turkey should be mindful of any political setbacks to Turkey’s European dream, which could pull the country back into its religious and, thus, non-consumerist past.